SA electricity system issues are a major constraint on investment

PERTH (miningweekly.com) – South Africa’s Mineral Resources and Energy Minister, Gwede Mantashe, has urged continued foreign investment into the country’s resources sector, saying that the government is actively working to address electricity issues, which have constrained economic growth.

Speaking on the sidelines of Paydirt’s African Downunder conference, in Perth, Mantashe told Mining Weekly Online that until the question of electricity pricing in South Africa was sorted, economic growth would not be sustainable.

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“If you get the energy sector working, mining will work and the economy will grow,” he said.

“Our power utility Eskom continues to play a significant role in ensuring energy supply; however, in recent years it has experienced challenges relating to securing the right quality and quantities of coal at fair market prices.

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“To this extent, we still encourage companies to invest in the coal sector in South Africa, with a sharper focus on clean coal technologies to ensure a positive contribution to carbon emissions reduction."

He also reflected on Eskom's financial, operational and structural challenges and said that government had initiated a process of restructuring the power utility.

"To this end, a chief restructuring offer has been appointed to oversee Eskom’s restructuring process and work with the utility board and management to carry out the recommendations of the Presidential task team, appointed in 2018,” the Minister told delegates at the mining event in Australia.

Mantashe noted that government would shortly meet with stakeholders, including Eskom, Minerals Council South Africa, coal producers and the National Energy Regulator of South Africa to discuss the issues facing the debt-laden power utility.

A range of options would need to be discussed to lower the price of electricity, including commodity price linked electricity pricing, which was previously used in chrome smelting operations in South Africa.

Meanwhile, he reported that South Africa continued to enjoy resource investment in 2018, with the mining sector receiving more than $3.2-billion in investments, resulting in the creation of around 5 000 jobs.

These investments was mostly related to lead, zinc, coal, diamonds, copper, heavy mineral sands and manganese, with some 60 projects currently in the development pipeline worth an estimated $7.8-billion and potential job opportunities of over 30 000 in the medium to long term.

Mantashe said that South Africa was also looking to increase it share of global exploration expenditure from the current 1% to over 5% in the medium term.

To expedite exploration activities, the country was undertaking a ten-year intensive mapping programme, through the Council for Geosciences, which will produce detailed geological maps.

In terms of legislation, Mantashe told Mining Weekly Online that new amendments to the Mineral and Petroleum Resources Development Act (MPRDA) would only be considered once the Petroleum Bill has been formalised.

Mantashe in August told Parliament that the MPRDA Amendment Bill should be scrapped in its entirety